Conference Call with Capri Global Capital (CGCL) Management and Analysts on Q1FY21 Performance and Outlook. Listen to the full earnings transcript.
Conference Call with Capri Global Management and Analysts on Q4FY20 Earnings Performance and Outlook. Listen in to the full earnings transcript.
Call Participants: Rajesh Sharma – Managing Director, Ashish Gupta – Chief Financial Officer, Hardik Shah – Vice President (Corporate Strategy)
Introductory Remarks from Rajesh Sharma
Good afternoon everyone and thank you all for joining us on this call. I hope you and your families are safe in these unprecedented times. This is an extremely challenging time for all of us and our thoughts are with those all of us who are affected by Covid-19, particularly those who are on the frontlines of this crisis. I would like to highlight some of the ways we are responding to Covid-19. We are focussed on being there for our employees, our customers, our clients in this unprecedented environment and climate. While we don’t know how this will play out and how long this will go on, we will be transparent here about what we know today.
Our number one priority is to continue to provide services in an uninterrupted way while we are also providing a safe work environment for all of our team members. We are incredibly proud of all that our firm has been able to do over the past few weeks. The need of the hour was to ensure that we provide our work through the right tool to ensure that they effectively can discharge remotely including operations and finance team, sales credit risk managers by ensuring their safety and well being. Currently, we have the majority of the workforce working from home across the company except the collection team. For those who still need to go to the office or into a branch, we are taking extra precautions and being extremely mindful of their safety. We are aiding in other ways to further incidents by offering free Covid related medical treatment for all our employees and their dependants.
To cater to various capabilities during this challenging time, we distributed groceries and essential items to almost 4,700 families. We have been associated with the 8 NGOs to reach out to the daily wage workers, strangulated families and children to deal with this pandemic situation. On the consumer side, we are proactively trying to service customers through every possible mode. The customer care team is actively in touch with the customers via calls, emails, and our business team is reaching out to customers and educating them about the impact of moratorium and other policy decisions. We continue to support our customers and clients by providing liquidity and advice during this market environment.
On the business front, Covid-19 lockdown has not any impact on our ability to render services to our customers or lenders. The sales team are actively interacting with customers, reassessing their portfolio and assessing their risk and further any requirements if any decision to cater to. I would now like to discuss the highlights of fourth quarter financial performance. During Q4, the firm reported net interest income of INR 94 crore, profit after tax of Rs 35 crore and an annualized return on equity was 9.9%. While the underlines of this quarter fundamentals performed very well, we reported numbers of significant items. Given the uncertainty over the potential macroeconomic impact, we have made extra provisions for expected credit loss on the financials for Q4FY20 and full financial year 2020. Accordingly, the company has increased the outlay by increasing the probability of default and loss we will default by 15% - 30% and made provisions of about INR 36.6 crores specifically pertaining to Covid-19 impact. Based on the current and the future economic conditions, we consider these provisions to be adequate.
I would now talk through some key metrics. We continue to be extremely prudent of our expenses and continuously try to improve our employees’ productivity through utmost use of technology. This has in time assisted us in bringing down our cost to income ratio to 38.4% in FY20 against 46.6% in FY19. We are primarily funded by leading Indian banks and we constitute almost 95% of our borrowing mix. During the last 12 months, we have dealt in maintaining a strong liquidity position with addition of new bank lines of Rs 2,000 crores and underarm credit lines of about Rs 605 crore ending FY20. It is the highest ever in the history of Capri Global.
Additionally, we have around Rs 435 crores of special investment which make us well placed on the liquidity front at this point to tackle any short term headwinds. Also, we have one of the highest capital adequacy ratio in the industry at 38.7% which places us well for future growth. We reported a strong and healthy FY20. Our profit after tax for FY20 stood at Rs 1,612 crore, a grow of 19% from YoY. Our net interest income was 20% higher at Rs 3,872 crore for FY20. MSME lending continues to be the key focus area and constitute 51% of the book, while the rest of the contribution comes from construction finance and housing finance constituting 24% and 22% of our overall portfolio respectively.
Asset quality remains healthy with GNPA - 90+ DPD portfolio at 2.36% and net NPA at 8.79%. Our net interest margin has improved to 9.5% in FY20 compared to 9.3% in FY19. Our RoE stood at about 11% while our return on average assets stood at 3.7% for FY20. We have also received approvals from the largest lender of the country for securitization of loans of Rs 500 crores. We continue focusing on expanding our retail book with successful adoption of low cost technology.
While the government and the RBI have taken multiple measures to boost economic growth, sentiment is still weak and recovery is going to take some time. RBI also took unprecedented measures of permitting moratoriums for all the loans till May 31st. We applaud them for the same. However, there are moral hazards in potential behavioural issues by the borrowers that we need to be careful about. During the severity of the situation, RBI will be required to take more and more such measures for NBFCs and housing finance companies and the government must intervene to take measures on revival specifically for sectors like real estate, hospitality, etc.
